Sam’s Club CEO Out Amid Tough Costco Battle
Sam’s Club CEO Rosalind Brewer is leaving the company after five years leading the bulk retailer, implementing many initiatives aimed at trying to catch up to formidable rival Costco Wholesale.
The well-regarded Brewer, in the a top job since 2012, is leaving the $57 billion-a-year next month company because “she wants a new challenge,” Doug McMillon, CEO of parent company Wal-Mart Stores (WMT), told staff in a memo on Friday. She will be replaced by John Furner, Sam’s Club’s chief merchant. Brewer, No. 19 on Fortune’s Most Power Women in business list, was one of the few top African-American executives in retail.
On her watch, Sam’s Club made large strides in e-commerce with initiatives such as drive-through pick up of online orders and scan-and-go, which allows members to scan items with their own phones and speed up checkout, features that gave the chain a rare advantage over Costco. Sam’s Club is also in the midst of repositioning itself to attract a more affluent clientele (Brewer ambitiously and perhaps unrealistically wanted to take the average household income of a Sam’s shopper to $100,000 from $80,000), overhauling its grocery offering (60% of sales) and streamlining and improving Sam’s private label brands. (Costco’s Kirkland brand is a $15 billion-a-year juggernaut in the U.S. that encompasses everything from pork chops to household cleaning goods.)
Despite her efforts, the 650-store Sam’s Club chain has struggled to narrow the sales growth gap with Costco. Sam’s has reported growth, albeit modest, in the last three quarters, including a 1.4% jump (excluding fuel) in the most recent quarter. But those numbers pale in comparison to the growth rates at Costco, which have typically been several percentage points higher than Sam’s in recent years.
Arguably, Brewer and frankly any Sam’s Club CEO, is fighting with one hand tied behind his or her back. The average household income of a Costco member is about $120,000, making it much less vulnerable to downturns in consumer spending, and the travails of small businesses. What’s more, as Sam’s was built up in the 1980’s, it leveraged Walmart’s clout with real estate developers and ended up with stores near its sister chain. That gave it a fleet of stores in typically less desirable markets than those of Costco.
“She’s leaving Sam’s with momentum,” said McMillon. “Roz and the team have developed a strategy that’s led to three consecutive quarters of improving comp sales and some exciting innovation.”
After a 22-year career at consumer products maker Kimberly-Clark (KB) where she started as a scientist and later led its Global Nonwovens Sector, Brewer joined Walmart in 2006 as regional vice president, overseeing operations in Georgia. She climbed the ranks to become division president of the Southeast, and later Walmart East.
Though Brewer made the unusual step of leaving before lining anything new up, suggesting Wal-Mart was looking for a change, Brewer can take solace in that former Sam’s Club CEOs often land well: her predecessors include McMillon and Brian Cornell, now CEO of Target.